TaxTMI 
TaxTMI 
2019 (1) TMI 1688
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....nt's Grounds of Appeal are independent of and without prejudice to one another. Ground I - Additions in respect of interest income of Rs. 3.08,25,79,613/- earned on foreign currency loans given to Indian Corporates Oil facts and circumstances of the case and ill the CIT(A) erred in denying the benefits of Article II (3)(c) of the Double Taxation Avoidance Agreement between India and Mauritius ('India-Mauritius 'Tax Treaty') and upholding the contentions of the Assessing Officer in taxing interest income of Rs. 3,08,25,79,6 13 earned oil currency loans on the ground that the interest income is not beneficially owned by the Appellant. The Appellant prays that the addition made by the Assessing Officer which has been upheld by the CIT(A) in respect of interest income on foreign currency loans be deleted. Ground 2 - Additions in respect of interest income of Rs. 4.96.68.73.353 earned on debt securities. The CIT(A) erred in setting aside the issue of chargeability of interest income oil securities of Rs. 4.96,68,73,353 to the file of the Assessing Officer for fresh adjudication in accordance with a view taken by the Hon'ble Income ....
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....appellant before us is a limited liability company which is incorporated registered and tax resident of year relevant to the assessment year under consideration, assessee had, inter-alia, earned interest income of Rs. 94,57,45,856/- from investments in debts securities made in accordance with the SEBI Regulations. In its return interest income was claimed not taxable in India on the strength Article 11(3)(c) of the India-Mauritius Double Tax Avoidance convention thereinafter referred to as 'India-Mauritius Tax Treaty'). The said exemption was denied by the Assessing Officer in the assessment order passed u/s 143(3) r.w.s. 144C(13) of the Act dated 28.01.2016, which was in conformity with the directions of the Dispute Resolution Panel (DRP) Pertinently, the exemption was denied on the ground that the requisite conditions prescribed in Article 11(3)(c) of the India-Mauritius Tax Treaty were not fulfilled by the appellant-assessee inasmuch as - (i) the interest was not "derived" by the assessee; (ii) that interest was not "beneficially owned" by the assessee; and, (iii) that the assessee ought to be carrying on bona fide banking business, which it could not. All the aforesaid ....
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....herein assessee asserted that the interest income of Rs. 94,57,45,856/- earned from investment in debt securities was beneficially owned by it. Assessee specifically drew attention of the DRP to CBDT Circular no. 789 dated 13.04.2000 which, inter-alia, prescribed that wherever a Certificate of Residence is issued by Mauritian authorities, such Certificate will constitute sufficient evidence for not only accepting the status of residence, but also the beneficial ownership in order to apply the provisions of India-Mauritius Tax Treaty. Further, in support of such a plea, assessee also relied on the Hon'ble Bombay High Court in the case of DIT vs Universal International Music B.V, (2013) 31 taxman.com 223 which held that a company incorporated under the laws of Netherlands and holding valid Tax certificate issued by the Netherland authorities was to be construed as the beneficial owner of the Royalty income received from the Indian company and was accordingly held entitled to the benefits of Article 12 of the Double Taxation Avoidance Agreement between India and Netherlands. It was pointed out that assessee had obtained Tax Residency Certificate from the Mauritian Revenue authorit....
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.... business which is a resident of the other Contracting State (i.e. Mount/us). There is no dispute that Mauritian entities in quest/on were carrying out banking business in Mount/us, and there is nothing on record to show, or even indicate, that the beneficial owner of interest income were not these Mount/an entities. The protection of article 11(1) cannot, therefore, be declined on the facts of the present case. We are, therefore, of the considered view that the income embedded in these interest payments are not taxable in India. Accordingly, the assessee did not have any tax withholding Obligations, u/s 195, in respect of these payments, and, as a corollary thereto, disallowance u/s 40(a)(i) was not justified." 6. On the aforesaid basis, it is pointed out that following the decision of Chennai Bench of the Tribunal in the case of Hyundai Motor India Ltd. it is, therefore, to be held that assessee was indeed the 'beneficial owner' of the interest come in question also other hand, the Id. DR appearing for the Revenue, has merely reiterated the discussion made by the DRP in its order, which we have already noted in the earlier paras and is not being repeated....
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.... impugned interest income is with the assessee. 9. At this point, we may note that the CBDT Circular no. 789 dated 13.04.2000 (supra) is specifically in the context of incomes by way of dividend and capital gain on sale of shares. So, however, in our considered opinion, it would equally apply even in the situation before us where the application of the provisions of the India-Mauritius Tax Treaty is sought to be applied for considering the taxability of interest income as per Article 11(3)(c) of the India-Mauritius Tax Treaty. We say so by drawing strength from the judgment of the Hon'ble Bombay High Court in the case of Universal International Music B.V (supra). The issue before the Hon'ble High Court was relating to the taxability of Royalty income in the context of India-Netherland Double Taxation Avoidance Agreement. In the said decision also CBDT Circular no. 789 dated 13.04.2000 (supra) was held applicable in Royalty income. Thus, in our considered opinion, even in the context of the impugned interest income, Circular no. 789 dated 13.04.2000 CBDT is applicable while applying the provisions of Article of the India-Mauritius Tax Treaty. On this aspect itself we up....